Bonus: Potential Animal Welfare Impacts on Grain Prices
Suppose animal rights activists' efforts result in a 10% cut in corn feeding to livestock. How would that trim corn prices?
John Otte
Published: Feb 8, 2010
Current domestic corn feed demand including distillers grain feeding is around 6.2 to 6.3 billion bushels, not counting DGS being exported, explains Bob Wisner, biofuels economist at Iowa State University's Ag Marketing Resource Center.
That's roughly 48% of the 2009 U.S. corn crop. Suppose 10% of that were taken away. Demand would drop by about 620 to 630 million bushels.
Losing that much consumption would be enough to boost corn carry-over stocks just in the first year by 38% to 40%.
"Loss of demand would have a cumulative effect over several years, unless offset by reduced production or some new and offsetting source of demand," says Wisner. "Based on price relationships of a few years ago, I would have figured this would tend to reduce the season average corn price by somewhere between 28 to 38 cents per bushel, assuming no other market factors change.
"In today's markets, I believe the impact could be considerably larger over a period of three or four years, if no other price influencing factor changes," adds Wisner.
Some of that loss of domestic feed demand might be transferred abroad, with the U.S. importing more meat -- probably from Mexico, Canada and other areas unless their livestock industries face the same pressure.
Predicting how livestock industries in other countries would respond to a 10% livestock production reduction here is more challenging than predicting how U.S. grain prices would respond to a 10% livestock cut.
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Tagged: biofuels, Bushel, corn crop, Iowa State University
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